Game changer: DOD rewrites its book on acquisition strategy

New guidance takes on bureaucracy, business incentives and an overall shift in Pentagon acquisition management

By Amber Corrin

Sep 14, 2010

Defense Secretary Robert Gates today released a 23-point memorandum for reforming defense acquisition processes, aiming for increased efficiency and productivity and proclaiming a new era in defense spending and acquisition strategy.

“We are focused on changing the way the Pentagon does business,” Gates said at a Pentagon briefing discussing the new guidelines.

The guidance, a culmination of several months' worth of critical analysis of defense spending, establishes targets and milestones to measure improvement and takes on bureaucracy, business incentives and an overall shift in acquisition from large-scale weapons and systems to services.

In the new Defense rulebook there are five points of focus: setting goals for affordability and control cost growth; incentivizing productivity and innovation in industry; promoting real competition; improving tradecraft in services acquisition; and reducing non-productive processes and bureaucracy.

Gates said that under a new “will cost/should cost” initiative, program managers will now be required to set affordability targets for their projects that cannot be altered without approval from Ashton Carter, undersecretary of Defense for acquisition, technology and logistics.

“We need to design for affordability,” Gates said. The next-generation ballistic missile submarine, a new Marine Corps presidential helicopter and a new Army ground combat vehicle are examples of programs had been forced back to the drawing board after cost overruns and cancellations, he said.

“Past mismanagement deprived us of incentives to bring down costs,” Gates said as he discussed incentivizing to increase productivity and efficiency.

To do so, Gates said he is expanding the Navy’s preferred buyer program across DOD; the program effectively lists contractors with optimal performance records and gives them preferential status in consideration of new contract awards.

“The way to reduce costs is to incentivize cost reduction. We’re going to make sure we’re giving contractors the right incentives,” Carter said at the briefing, including by improving contract structures and examining sub-contracting fees.

Additionally, the new measures will force contractors to share cost overruns with the government if programs become more expensive than originally planned.

Competitive bidding and contract award practices are also being instituted, with special attention paid to contract opportunities that receive only one bid – which Carter said represents “a substantial number of contract awards.”

“Real competition is the biggest driver of productivity,” said Carter.

At the Pentagon briefing, Gates and Carter both acknowledged the department’s own role in runaway acquisition costs and pledged to make it a priority to eliminate redundant steps and requirements in the acquisition process.

“In some cases our own bureaucratic processes contribute to contractor behavior,” Gates said, noting the elimination of “unneeded” reports and unnecessary requirements and processes imposed on contractors by DOD.

“These bureaucratic processes waste our time and your taxpayer money. We are a contributor to low productivity, and we need to step up,” Carter said.

“Implementation is everything, and we recognize that,” he added, vowing that the department will continue its aggressive pursuit of cost savings that began at the beginning of the summer with basic plans for acquisition reform.

According to Gates, Carter will report to him monthly on progress in meeting designated targets and milestones.